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Govt to continue with rice price subsidy scheme despite criticism

Thailand's Commerce Ministry is preparing to seek approval from the National Rice Policy Committee to launch the second round of its nationwide rice mortgage scheme despite strong criticism that there will be huge public losses from buying paddy at a high price.

The ministry will ask for Bt200 billion to finance the scheme.

According to Commerce Minister Boonsong Teriya-pirom, the new rice mortgage scheme will likely start on October 1 at a price of Bt15,000 per tonne for rice paddy and Bt20,000 per tone for Hommali rice.

In the first year of this programme, the government has already stockpiled more than 10 million tonnes of rice at a price at least 25 per cent higher than the prevailing market price.

Critics such as Dr Ammar Siamwalla, former president of the Thailand Development Research Institute, said the government may lose Bt100 billion from the first round of the scheme.

However, the commerce minister is not worried and said the government will accept an unlimited volume of rice from farmers at the high price.

Overall, Thailand will still be able to export as much as 8 million tonnes of rice on a government-to-government basis this year, he asserted.

The government also refused to disclose its official rice inventory, while Yanyong Puang-raj, the commerce permanent secretary, said the government's schemes would help farmers to get more money.

"It's time for farmers to make money, as exporters have benefited enough in previous years," he said.

During the last general election a year ago, the rice scheme was one of the major populist policies offered by Pheu Thai, which aims to enrich farmers via state budgets.

Critics estimate that the government will spend as much as Bt300 billion in financing these rice mortgage schemes. For exporters, the schemes are anti-market, as they make Thai rice uncompetitive on the world market.

By boosting domestic rice prices to a high of Bt15,000-20,000 per tonne, it is difficult for Thai exporters to compete with other exporting countries.

Dr Ammar earlier urged the government to review its rice scheme because it is costly and ineffective. The widely respected economist believes that many farmers do not benefit from this scheme, which replaced the previous government's rice price guarantee scheme. If the government continues this project, it will likely face a dead-end and losses will skyrocket due to falling rice prices when the huge government stock is released onto the market.

So far, it is estimated that the government has already spent more than Bt200 billion in public money to finance the rice mortgage scheme.

Rice trading sources said the government could face a loss of no less than Bt100 billion from the scheme based on the government's stock of over 10 million tonnes, whose average price is about US$800 per tonne.

Niphon Paupongsathorn, president of TDRI, said the government's rice mortgage scheme will affect the country's long-term fiscal discipline because a very large volume of rice is involved and there is no plan to release the huge stock onto the market yet.

He suggested that the government should set up a non-partisan committee to supervise the scheme and ensure transparency.

Chukiat Opaswongse, honorary president of the Thai Rice Exporters' Association, said the mortage prices should be revised as prices are now Bt3,000-5,000 higher than market prices.


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